CHAPTER I

COMMON PROVISIONS AND RECOVERY PLANS
SECTION II

Content of recovery plans

Information to be included in a recovery plan
Article 3
A recovery plan shall include at least the following items:
1. a summary of the key elements of the recovery plan, in accordance with Article 4;
2. information on governance, in accordance with Article 5;
3. a strategic analysis, in accordance with Articles 6 to 12;
4. a communication and disclosure plan, in accordance with Article 14;
5. an analysis of preparatory measures, in accordance with Article 15.

Summary of the key elements of the recovery plan
Article 4
1
The summary of the key elements of the recovery plan shall cover summaries of each of the following:
a
the recovery plan's information on governance;
b
the recovery plan's strategic analysis, including a summary of overall recovery capacity referred to in Article 12(3);
c
any material changes to the institution, group or recovery plan since the previous version of the recovery plan submitted to the competent authority;
d
the recovery plan's communication and disclosure plan;
e
the preparatory measures set out in the recovery plan.
2
For the purposes of Sections II and III of Chapter I of this Regulation, material change means any change which could impact the ability of an institution or of an EU parent undertaking or one or more of its subsidiaries to implement a recovery plan or to implement one or more recovery options contained in a recovery plan.

Governance
Article 5
The information on governance shall contain at least a detailed description of the following matters:
1. how the recovery plan was developed, including at least:
  1. the role and function of persons responsible for preparing, implementing and updating each section of the plan;
  2. the identity of the person who has overall responsibility for keeping the recovery plan up-to-date and a description of the process to be used for updating the recovery plan to respond to any material changes affecting the institution or group or their environment;
  3. a description of how the plan is integrated in the corporate governance of the institution or group and in the overall risk management framework;
  4. if the considered entity is part of a group, a description of the measures and arrangements taken within the group to ensure the coordination and consistency of recovery options at the level of the group and of individual subsidiaries;
2. the policies and procedures governing approval of the recovery plan, including at least:
  1. a statement whether the recovery plan has been reviewed by an internal audit function, external auditor or risk committee;
  2. confirmation that the recovery plan has been assessed and approved by the management body of the institution or EU parent undertaking responsible for submitting the plan;
3. the conditions and procedures necessary to ensure the timely implementation of recovery options, including, at least:
  1. a description of the internal escalation and decision-making process that applies when the indicators have been met, to consider and determine which recovery option may need to be applied in reaction to the situation of financial stress that has materialised, including at least:
    1. the role and function of persons involved in this process, including a description of their responsibilities, or, where a committee is involved in the process, the role, the responsibilities and function of committee members;
    2. the procedures that need to be followed;
    3. the time limit for the decision on taking recovery options and when and how the relevant competent authorities will be informed of the fact that the indicators have been met;
  2. a detailed description of the indicators, reflecting possible vulnerabilities, weaknesses or threats to, as a minimum, the capital position, liquidity situation, profitability and risk profile of the entity or entities covered in the recovery plan;
4. the plan's consistency with the general risk management framework of the institution or group, including a description of the relevant benchmarks (early warning signals) used as part of the institution's or group's regular internal risk management process, where these benchmarks are useful to inform the management that the indicators could potentially be reached;
5. management information systems, including a description of arrangements in place to ensure that the information necessary to implement the recovery options is available for decision-making in stressed conditions in a reliable and timely way.

Strategic analysis
Article 6
1
The strategic analysis shall identify core business lines and critical functions and set out the key steps to maintaining those core business lines and critical functions in a situation of financial stress.
2
The strategic analysis shall include at least the following subsections:
a
a description of the entity or entities covered by the recovery plan, as set out in Article 7;
b
a description of recovery options, as set out in Articles 8 to 12.

The description of entities covered by the recovery plan
Article 7
1
The subsection of the strategic analysis describing the entity or entities covered by the recovery plan shall comprise the following information:
a
a general characterisation of the entity or entities covered by the recovery plan, including:
1. a description of their overall global business and risk strategy;
2. their business model and business plan, including a list of the main jurisdictions in which they are active, including through a legal entity or a branch meeting the conditions set out in paragraph 2;
3. their core business lines and critical functions;
4. the process and metrics for identifying their core business lines and critical functions;
b
a mapping of the core business lines and critical functions to the legal entities and branches meeting the conditions set out in paragraph 2;
c
a detailed description of the legal and financial structures of the entity or entities covered by the plan, including an explanation of intra-group interconnectedness with respect to any legal entities or branches meeting the conditions set out in paragraph 2 and in particular a description of the following:
1. all existing material intra-group exposures and funding relationships, capital flows within the entity or entities covered by the recovery plan, intra-group guarantees that are in place and intra-group guarantees that are expected to be in place when recovery action is required;
2. legal interconnectedness, which shall cover material legally binding agreements between entities of a group including, for example, the existence of domination agreements and profit and loss transfer agreements;
3. operational interconnectedness, which concerns functions that are centralised in one legal entity or branch and are important for the functioning of other legal entities, branches or the group, in particular centralised information technology functions, treasury functions, risk functions or administrative functions;
4. any existing group financial support agreements concluded in accordance with Article 19 of Directive 2014/59/EU including the parties to the agreement, the form of the financial support and the conditions associated with the provision of the financial support;
d
a description of external interconnectedness including at least:
1. significant exposures and liabilities to main counterparties;
2. significant financial products and services which are provided by the entity or entities covered by the recovery plan to other financial market participants;
3. significant services which third parties provide to the entity or entities covered by the recovery plan;
2
For the purposes of points (b) and (c) of paragraph 1, the reference to legal entities or branches shall be understood as a reference to legal entities or branches which:
a
substantially contribute to the profit of the entity or entities covered by the recovery plan or to their funding, or hold an important share of their assets, liabilities or capital;
b
perform key commercial activities;
c
centrally perform key operational, risk or administrative functions;
d
bear substantial risks that could, in a worst-case scenario, jeopardise the viability of the institution or group;
e
could not be disposed of or liquidated without likely triggering a major risk for the institution or group as a whole;
f
are important for the financial stability of at least one of the Member States in which they have their registered offices or operate.

Recovery options
Article 8
1
The subsection on recovery options shall include a list of all recovery options and a description of each option, as set out in Articles 9 to 12.
2
The subsection on recovery options shall set out a range of recovery options designed to respond to financial stress scenarios and which could reasonably be expected to contribute to maintaining or restoring the viability and financial position of the entity or entities covered by the recovery plan.
3
Each recovery option shall be described in a way that enables the competent authority to assess its impact and feasibility.
4
Recovery options shall include measures which are extraordinary in nature as well as measures that could also be taken in the course of the normal business of the entity or entities covered by the recovery plan.
5
Recovery options shall not be excluded for the sole reason that they would require a change to the current nature of the business of that entity or those entities.

Actions, arrangements and measures under recovery options
Article 9
1
Each recovery option shall indicate at least the following:
a
a range of capital and liquidity actions required to maintain or restore the viability and financial position of the entity or entities covered by the recovery plan which have as their primary aim ensuring the viability of critical functions and core business lines;
b
arrangements and measures the primary aim of which is to conserve or restore the institution's own funds or the group's consolidated own funds through external recapitalisations and internal measures to improve the capital position of the entity or entities covered by the recovery plan;
c
arrangements and measures to ensure that the entity or entities covered by the recovery plan have adequate access to contingency funding sources to ensure that they can carry on their operations and meet their obligations as they fall due;
d
arrangements and measures to reduce risk and leverage, or to restructure business lines including, where appropriate, an analysis of possible material divestment of assets, legal entities, or business lines;
e
arrangements and measures the primary aim of which is to achieve a voluntary restructuring of liabilities, without triggering an event of default, termination, downgrade or similar.
For the purposes of point (c), the measures shall include external measures and, where appropriate, measures that aim at reorganising the available liquidity within the group. The contingency funding sources shall include potential liquidity sources, an assessment of available collateral and an assessment of the possibility to transfer liquidity across group entities and business lines.
2
Where a recovery option does not include the actions, arrangements or measures set out in points (a) to (e) of paragraph 1, the subsection on recovery options shall contain a demonstration that those actions, arrangements or measures have been adequately considered by the institution, the Union parent undertaking or the subsidiary which drew up and submitted the plan.

Impact assessment
Article 10
Each recovery option shall contain an impact assessment that shall include, in particular, a detailed description of the processes for determining the value and marketability of the core business lines, operations and assets of the entity or entities to which the recovery option relates, and at least the following elements:
1. a financial and operational impact assessment which sets out the expected impact on solvency, liquidity, funding positions, profitability and operations of the entity or entities covered by the recovery plan; where relevant, the assessment shall clearly identify the different entities of the group which may be affected by the option or involved in its implementation;
2. an assessment of external impact and systemic consequences which sets out the expected impact on critical functions performed by the entity or entities, covered by the recovery plan, and the impact on shareholders, on customers, in particular depositors and retail investors, on counterparties and, where applicable, on the rest of the group;
3. the valuation assumptions and all other assumptions made for the purpose of the assessments in points (1) and (2), including assumptions about the marketability of assets or the behaviour of other financial institutions.

Feasibility assessment
Article 11
1
Each recovery option shall contain a feasibility assessment, which shall include at least:
a
an assessment of the risk associated with the recovery option, drawing on any experience of executing the recovery option or an equivalent measure;
b
a detailed analysis and description of any material impediment to the effective and timely execution of the plan and a description of whether and how such impediments could be overcome;
c
where applicable, an analysis of potential impediments to the effective implementation of the recovery option which result from the structure of the group or of intra-group arrangements, including whether there are substantial practical or legal impediments to the prompt transfer of own funds or the repayment of liabilities or assets within the group;
d
solutions to the potential impediments identified in points (b) and (c).
2
For the purposes of paragraph 1, a material impediment shall include any factor that could potentially negatively affect the timely execution of the recovery option including, in particular, legal, operational, business, financial, and reputational risks such as any risk of a credit rating downgrade.

Continuity of operations
Article 12
1
Each recovery option shall contain an assessment of how the continuity of operations will be ensured when implementing that option.
2
That assessment shall include an analysis of internal operations (for example, information technology systems, suppliers and human resources operations) and of the access of the entity or entities covered by the recovery plan to market infrastructure (for example, clearing and settlement facilities and payment systems). In particular, the assessment of operational contingency shall take into account:
a
any arrangements and measures necessary to maintain continuous access to relevant financial markets infrastructure;
b
any arrangements and measures necessary to maintain the continuous functioning of the operational processes of the entity or entities covered by the recovery plan, including infrastructure and IT services;
c
the expected time frame for the implementation and effectiveness of the recovery option;
d
the effectiveness of the recovery option, and the adequacy of indicators in a range of scenarios of financial stress which assesses the impact of each of these scenarios on the entity or entities covered by the recovery plan, in particular on their capital, liquidity, profitability, risk profile and operations.
3
That assessment shall identify the recovery option which could be appropriate in a specific scenario, the potential impact of the recovery option, its feasibility, including the potential impediments to its implementation, and the time frame required for its implementation.
On the basis of this information, the assessment shall describe the overall recovery capacity of the entity or entities covered by the recovery plan, being the extent to which the recovery options allow that entity or those entities to recover in a range of scenarios of severe macroeconomic and financial stress.

Cross references
Article 13
Where information set out in Article 7 has been submitted to resolution authorities pursuant to Article 11 of Directive 2014/59/EU, competent authorities may choose to accept cross references to that information as sufficient for meeting the requirement in Article 7 if they do not compromise the completeness and quality of the recovery plan, as required by Section III of Chapter I of this Regulation.

Communication and disclosure plan
Article 14
1
The communication and disclosure plan shall cover the following matters in detail:
a
internal communication, in particular to staff, works councils or other staff representatives;
b
external communication, in particular to shareholders and other investors, competent authorities, counterparties, financial markets, financial market infrastructure, depositors and the public, as appropriate;
c
effective proposals for managing any potential negative market reactions.
2
A recovery plan shall include, at least, an analysis of how the communication and disclosure plan would be implemented when one or more of the arrangements or measures set out in the recovery plan are implemented.
3
The communication and disclosure plan shall adequately consider any specific communication needs for individual recovery options.

Preparatory measures
Article 15
1
A recovery plan shall include an analysis of any preparatory measures that the entity or entities covered by it have taken or which are necessary to facilitate the implementation of the recovery plan or to improve its effectiveness together with a timeline for implementing those measures.
2
Such preparatory measures shall include any measures necessary to overcome impediments to the effective implementation of recovery options which have been identified in the recovery plan.